Oil Market Report - October 2023

12 October 2023 •Evidence of demand destruction is appearing with preliminary September data showing that US gasolineconsumption fell to two-decade lows. Buoyant demand growth in China, India and Brazil, neverthelessunderpins an increase of 2.3 mb/d to 101.9 mb/d in 2023, of which China accounts for 77%. Growthslows to 900 kb/d in 2024, as efficiency gains and a deteriorating economic climate weigh on oil use. •World oil output rose 270 kb/d in September to 101.6 mb/d, led by higher production from Nigeria andKazakhstan. The Israel-Hamas conflict has not had any direct impact on oil flows. Driven by non-OPEC+growth, global output will increase by 1.5 mb/d and 1.7 mb/d in 2023 and 2024, respectively, to newrecord highs. Overall OPEC+ output is set to decline in 2023, although Iran may rank as the world’ssecond largest source of growth after the United States. •Refinery margins fell sharply from near-record levels over the course of September and into October, asgasoline and fuel oil cracks collapsed, but overall remained above the seasonal average. Global refinerythroughput rates reached a summer peak of 83.6 mb/d in August, underpinned by record Chinese runs.Refinery crude runs are expected to rise by 1.7 mb/d in 2023 and by 1 mb/d next year. •Global observed oil inventories tumbled by 63.9 mb in August, led by a massive 102.3 mb draw in crudeoil stocks. Preliminary data suggest that on land inventories continued to draw in September, while oilon water rebounded as exports recovered. OECD industry stocks fell counter-seasonally by 6.5 mb inAugust to 2 816 mb, a substantial 105.3 mb below the five-year average. •Russian oil export revenues surged by $1.8 bn to $18.8 bn in September, their highest since July 2022.Total oil exports rose by 460 kb/d to 7.6 mb/d, with crude oil accounting for 250 kb/d of the increase.The weighted average crude export price rose by $8/bbl to $81.80/bbl, narrowing its discount to NorthSea Dated to $12.20/bbl, its lowest since March 2022. •ICE Brent crude oil futures rose by $4/bbl after Hamas attacked Israel on 7 October as tradersreassessed geopolitical risks. Tightening balances following Saudi Arabia’s extension of voluntarysupply cuts had sent prices up by $8/bbl in September. However, gains subsequently dissipated in earlyOctober as renewed macro concerns took hold. At the time of writing, Brent traded at $87/bbl. Table of contents Escalating risks ........................................................................................................................ 3 Demand...................................................................................................................................... 4 Overview.................................................................................................................................. 4Milder weather reduces heating fuel use but potential for volatility remains ............................. 5OECD ...................................................................................................................................... 8Late-summer oil price rally rekindles inflationary fears ............................................................ 11Non-OECD............................................................................................................................. 13 Supply...................................................................................................................................... 18 Overview................................................................................................................................ 18OPEC+ crude supply............................................................................................................. 19Oil producers post surging profits after Saudi supply cutbacks ............................................... 21Russian oil export revenues jump in September on price and volume gains .......................... 23Non-OPEC+........................................................................................................................... 26 Refining ................................................................................................................................... 31 Overview................................................................................................................................ 31Product cracks and refinery margins..................................................................................... 32European diesel markets risk sustained tightness through winter season .............................. 37Regional refining developments............................................................................................ 39 Stocks ...................................................................................................................................... 43 Overview.................................................................................................